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Most paper checks can be disposed of once reconciled with monthly statements, but some need to be kept for tax purposes. Canceled checks should be kept for a minimum of seven years for tax records, while routine payments can be discarded after three years. It’s important to keep receipts and supporting documents for business expenses.
People often receive conflicting information about how long to keep a canceled check. In some cases, there may be different rules that apply to individuals versus business entities, but in general, most paper checks can be disposed of once they’ve been reconciled with your monthly statement. There are several exceptions, and most of them have to do with keeping accurate records for tax purposes. Depending on the type of expense, some canceled checks need to be kept for only one year, while others need to be on file for at least seven years.
A check that you have written is considered canceled when the funds have been withdrawn from your bank account. The actual check is usually stamped or marked as cancelled, and in some cases returned to you. Otherwise, you may receive a photocopy or access the information online; this bank practice is generally known as check retention, truncation, or escrow. You may not need to keep paper statements or checks if you access them online or by ordering copies from the bank. Many people find that these practices help them control their paper clutter.
Some potential situations where you would need to keep a canceled check might include providing it as proof of purchase for a defective item or proof of payment of an invoice. More importantly, some canceled checks should be kept as part of your tax records, just like those for deductible expenses. Most financial experts recommend presenting the canceled check for a minimum of seven and a maximum of ten years. For residents of the United States, this can help you protect your information and provide documentation if you are audited by the Internal Revenue Service (IRS).
Other canceled checks, such as those for routine payments, can generally be discarded after three years, at most. Some, however, may need to be kept to document healthcare-related charges for insurance purposes, for example. In addition, homeowners are often advised to keep canceled checks related to home improvements for as long as they own their property.
There are some disadvantages to having only a canceled check as documentation. In some cases, the check shows how much was paid and to whom, but does not indicate the details of what was purchased. As a result, it can be difficult to justify certain business expenses and write them off for tax purposes. Therefore, it may be helpful to keep receipts and other supporting documents as supplementary information. When no longer needed, checks and other documents generally need to be shredded to help prevent identity fraud.
Smart Asset.
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